The Great American Health Care Divide

In 1883, the authoritarian imperial government of Prince Otto von Bismarck – who famously declared, “It is not by speeches and majority votes that the great issues of our time will be decided…but by blood and iron” – established national health insurance for Germany.

The rationale for national health insurance is as clear now as it was to Bismarck 130 years ago. A country’s success – whether measured by the glory of its Kaiser, the expansion of its territory, the security of its borders, or the well-being of its population – rests on the health of its people.

Serious illness can strike anyone, and seriously ill people, as a rule, do not earn much money. The longer the seriously ill are untreated, the more costly their eventual treatment and maintenance become.

Private savings, as a rule, can pay the costs of treatment only for the thrifty and the well-off. So, unless we adopt the view that those without ample savings who fall seriously ill should quickly die (and so decrease the surplus population), a country with national health insurance will be a wealthier and more successful country. These arguments were entirely convincing to Bismarck. They are equally convincing today.

On January 1, 2014, the United States will partly implement a law – the Affordable Care Act (ACA) – that will not establish national health insurance, but that will, according to projections by the Congressional Budget Office, reduce by almost one-half the number of people in the US without health insurance. Back in 2009, President Barack Obama could have proposed a program as comprehensive as the one initiated by Bismarck. Such a program could have allowed, encouraged, and made it affordable for uninsured Americans to obtain health insurance similar to what members of Congress have; or it simply could have expanded the existing Medicare system for those over 65 to cover all Americans.

Instead, Obama put his weight behind the complicated ACA. The reason, as it was explained to me back in 2009, was that the core of the ACA was identical to the plan that former Massachusetts Governor Mitt Romney had proposed and signed into law in that state in 2006: “ObamaCare” would be “RomneyCare” with a new coat of paint. With Romney the Republican Party’s presumptive nominee for the 2012 presidential election, few Republicans would be able to vote against what was their candidate’s signature legislative initiative as governor.

Thus, the US Congress, it was supposed, would enact the ACA with healthy and bipartisan majorities, and Obama would demonstrate that he could transcend Washington’s partisan gridlock.

We know how that worked out. Not a single Republican voted for the Affordable Care Act in the House of Representatives. One Republican senator – Olympia Snowe of Maine – voted for it in committee, but then switched sides, threatened to kill it via filibuster, and voted against its final passage.

As for Romney, he refused to recognize any kinship between his bill and the ACA – sort of like when he refused to recognize details surrounding the participation in the 2012 Olympics of a Dressage horse that he owned.

But now January 1, 2014 is looming, and the Affordable Care Act is about to be implemented – but perhaps not everywhere. In the south and other Republican-controlled regions, legislators have refused to answer constituents’ questions about how to negotiate the new, changed bureaucracy. They have also refused the federal dollars earmarked to expand their state-level Medicaid programs. And they have refused to lift a finger to establish the “exchanges” that are supposed to give individuals and small businesses the same access to health insurance at competitive prices that employees of large businesses get via their companies’ benefits departments.

In the Democratic-controlled “blue” states, where 60% of the US population lives – and which account for 70% of national income and 80% of its wealth – implementation of the ACA is likely to be like that of RomneyCare in Massachusetts: a somewhat bumpy ride, but a clear success that nobody will wish to repeal after the fact. But no one knows what will happen in the “red states,” where the Republican political infrastructure is digging in its heels.

What will doctors and hospital administrators in Phoenix, Kansas City, Houston, and Atlanta do after they talk to their colleagues in Los Angeles, Seattle, Minneapolis, Chicago, Baltimore, and New York, where state governments and political structures are trying to make ACA implementation a success? Will they compare and contrast the conditions under which they are working? Which candidates will they support with donations and votes in the 2014 and 2016 elections? What will nurses and patients denied the benefits of the ACA do?

America’s partisan heat is about to be turned up over the next several election cycles, as the blame game begins. Bismarck would know who is at fault.

Brad DeLong, PhD is a professor of economics at U.C. Berkeley, chair of the Political Economy of Industrial Societies major, and a research associate of the National Bureau of Economic Research. Project Syndicate (c) 1995-2013.

28 replies »

  1. The same thing pretty much happens in the US. An ambulance would have transported her to the hospital and she would have been treated whether or not she could pay. That is by law and has been the law for decades.

  2. I know that the UK system get’s a bit of a knocking over the pond but I just wanted to relay what happened 5 minutes ago (here in Oxford, UK) to gauge your collective reaction:

    – I received a call shortly after lunch from one of my colleagues who had gone out for a run. She was lying in the road, screaming in agony and we leapt in the car and went out to find her.

    – When we got to her we found her collapsed in the road in a nearby village. A passing off duty paramedic had seen her lying on a quiet lane and stopped and gone into a nearby doctor’s NHS surgery to ask for help.

    The doctor had come out of his surgery, covered her with a blanket and, assuming that she had dislocated her hip, given her a couple of injections and was waiting with her whilst an ambulance turned up.

    – The ambulance turned up 5 minutes later and is currently taking her to the local hospital where a team is waiting to put her hip back in.

    No-one knew anything about her apart from her first name (well I do but the paramedic who stopped didn’t, the NHS doctor who administered first aid and gave her to shots didn’t) . Just like the way they all got involved without thinking about getting sued or paid.

    Without getting into the rights & wrongs of this system or that system and all the politics that goes with it: isn’t this how we want people to be treated and how we want people (and medical professionals) to behave?

  3. I don’t think the government can provide a “safety net” without their ego talking to them and telling them they can once again “take over”. Wasn’t social security supposed to be a safety net for the working man? Look what has happened to that!

  4. you can still get those benefits without worrying about maxing out! Kind of like your “healthy san francisco”… Even though you will be under you max out of pocket of $6,300 when ACA kicks in, you still don’t have to pay that much! Plus you can still get discounts on your specialty meds and see the doctor as much as you want.

    check out my site (you know, click on my name) and on the left you’ll see PROVIDER SEARCH. Plug in your information and see what kind of savings you can get! Let me know what you think!

  5. All I know is that the prices for everything needed for survival is rising!
    Food, Shelter, Health Maintenance Services.
    I do believe the ACA will benefit many & cripple most which will create further division between the classes. I thought he idea was to help those who need help & those that are trying to help themselves. How are most going to be able to afford to do this with the ACA?

    The penalty for not having insurance for the first year is supposed to be around $100 yr, right?
    Oh yeah, and by the way… ObamaCare doesn’t cover DENTAL & VISION?

    Although my family has insurance, I will be sticking to my DISCOUNT HEALTH & DENTAL PLAN! Because we can’t afford to pay what we will be asked of… even after “Insurance”! People may scoff at a Discount Plan, but we save a ton of money and hopefully will continue to! So we can afford the finer things in life…. like food and shelter for us and our children!

  6. If Obamacare is so wonderful, why did Congress exempt themselves from it?

  7. There are lots of reasons behind the unsuccessful health care of America but there are also several positive and successful reasons behind the American health care. Therefore in most of the occasion we have found that experts are providing better health care opportunities to overcome from the health care frauds and serve a quality health care symptom in front of the American people. Obamacare and other health care programs are quite eligible to serve these kinds of health care system among the people through which they are able to repair their health care loopholes.

  8. Yes, sir. I was expressing my shock that an American scholar (Mr. DeLong) would suggest that a country’s success can me measured by “the glory of its Kaiser”.

    Unless, of course, we are referring to our Kaiser in Oakland, CA – long may its managed-care model reign!

  9. To John Graham:

    I think that is misreading history, although that is forgiveable in someone this side of the ocean.

    At the time Bismarck introduced the idea of social insurance — more to maintain the economic viability of households than to improve their health — there were widespread socialist stirrings in Europe. Bismarck’s promotion of social insurance was what one might call a protective, preemptive reaction strike against the spread of socialism and communism in Europe.

    One could view employment-based healht insurance in a similar vein.


  10. so, under my current halth coverage – a local solution to the uninsured commonly known as “healthy san francisco” i had to pay a $10 co-pay for office visits. under the affordable care act, i’m going to incur a $45 dollar premium with a $45 office visit copay, $65 specialist copay, $19/month generic medication copay, $90 urgent care visit copay, $45 lab testing copay. Unfortunately, this kicks in because i earn $150 per year above the medi-cal cutoff. because I’m on some specialty medications that need to be monitored regularly my estimate is I’ll be paying around $1800 per year out of pocket instead of $40. Fortunately, that will be below my max out of pocket of $6,300. WHEW!!!

  11. @Gaybor K.: “The private,corporate sector has had 30 years of free reign over the health system.”

    Dead wrong!

    We haven’t had a free market in health care since WW2 when government entered the picture with wage and price controls leading to health care expenditures being one of the ways of attracting and keeping workers. Government then doubled down on a bad idea by affirming the tax breaks on this expenditure creating a permanent third party payer system which is one of the biggest causes of our problems today. For ~ half a century we have had Medicare, Medicaid, the VA and perhaps some other government adventures that have performed miserably.

    Time to get government failure out of the health care sector, but this doesn’t mean that government cannot help to provide safety nets for those in need.

  12. When Bismarck brought forth national health insurance, health care was quite basic and very public health oriented with clean water, sewer, basic hygiene in medical care — think hand washing and the effective use of isolation to mange the spread of infectious diseases. There was great value returned to society with the investment in basic health infrastructure and the expansion of “scientific” medicine. Today we spend 18% of GDP in an economic activity with only little emphasis on public benefit and increasing questionable value if we do waster 1/3rd of what we expend. The challenge to health reform American style is will we be able to capture value back to society or will it continue to be directed to special stakeholders.
    Until we figure this out, Southern and Republican states are OK with sacrificing their people’s health and well being. But those folks don’t vote for them anyway.

  13. Agree completely.Health care in this country will continue to be a debacle
    unless a valid universal single payer system is enacted.The private,corporate sector has had 30 years of free reign over the health system.They have failed the public big time.
    Weekend benefits and garage sales will continue during the ACA era…

  14. The vast majority of the uninsured are able to go to work every day (if they are fortunate enough to have jobs!)

    I am not saying this to praise the lack of health insurance — i find it hateful actually.

    But it does not create a public health crisis. The majority of expense in American health care goes to chronic and formerly fatal illnesses– heart disease, cancer, etc. We are thankfully a long way from epidemics like influenza or AIDs that wipe out workers or soldiers.

    Health insurance does make Americans wealthier when their employers pay for it under age 65, and when the taxpayers cover it over age 65.
    The ACA would have much wider support if it could have promised lower costs to everyone. Instead there are people who will pay more for insurance under the ACA, and the right wing is all to ready to remind them of this.

  15. Despite 40 votes by Republicans to appeal Obamacare it is here to stay.

    If it fails what we will probably default to is single payer “(Medicare for All”) which would be fine with me.

    The much bigger problem is the BIG LIE that organized medicine has accomplished by duping the American public into believing that what Organized Medicine does impacts significantly on human health outcomes.

    It has been know for decades that it does not nearly have the impact that other “non medical” factors do

    see http://www.unnaturalcauses.org

    Dr. Rick Lippin

  16. @Brad D.:” rests on the health of its people.”

    The health of a nation depends more upon its standard of living than it does on the health care system it utilizes. The ACA has not been proven to increase the standard of living, but it has been shown to cost jobs that are directly related to the standard of living. By that criteria the ACA should be abolished.

    I am not even sure if your history of Bismarck is correct. Perhaps Bismarck saw the provision of health care as a way to stem other socialistic ties. Alternatively or additionally a population that can give up control of health care can be easier for government’s to control.

    @Brad D.: “reduce by almost one-half the number of people in the US without health insurance.”

    Of course a very good percentage of that group could afford insurance, but didn’t want it so how is this bill supposed to be considered successful?

  17. Indeed. I’ve been trying to draw attention to this very same outcome, but the level of noise around the word “Obamacare” keeps drowning me out. Along with my suggestion that we forget about Wall St., and set about occupying K Street.

    You made me laugh out loud with the “Ignagni’s bookies will still collect their vig” line. Funny, and sad truth.

  18. Imagine if a powerful pricing cartel set costs so that basic automobiles cost $200,000 here while they cost $20,000 in the rest of the world. Also, imagine if gas cost $80 a gallon and every road had a $1 a mile toll. And then imagine if we spent all our time and effort trying to shift the cost around and design subsidies and government programs rather than deal with the question of why costs are so insanely high. This is the American medical system in a nutshell.

    Single payer universal care truly is the only solution, mainly because nothing else has a chance to put controls on medical costs.

    The big problem is that health care and health insurance in America is massively mind-numbingly expensive compared to every other developed country in the world.

    Basically, the medical industry in America is run like a massive criminal cartel that sets prices, controls markets, buys off politicians and collects pay-off money from the masses, which it funnels to corporate insiders.

    Obamacare is a disaster beyond belief not because it provides benefits to the undeserving or because it is anti-free-market, but because it does nothing to control costs. It keeps the insurance industry firmly in the loop, sucking off its percentage while providing no benefit. And it keeps the current system in place where everything from pills to doctors to hospital stays cost 5 to 10 times as much here as does in the rest of the world.

  19. Professor Delong,

    I typically like your blog, but I learned literally nothing from this post. You have more to offer than this.

  20. The reason Obama didn’t do it is that he didn’t have enough money. Providing all 50 million uninsured folk with a FEHB (e.g. Congressional) style benefit would have cost well north of $2 trillion. Medicare for all would have been a little, not a lot, cheaper (but only if the Germans actually managed the benefit). We don’t do simple very well in our country. And he certainly didn’t have enough Democratic votes for Medicare for all. Some moderates wouldn’t have gone for it.

    With the economy melting down and budget deficits soaring toward 10% of GDP, he just didn’t have the dollars (or votes). So he went “cheap”, with a partial fix which, fatally, relied heavily on a discredited Medicaid program for half his coverage expansion.

  21. I don’t get it.

    Well, that’s not true. It’s pejoratively called “ObamaCare” but it’s really “AHIPcare.” We seem utterly determined to waste even MORE billions of dollars pushing those dollars all over the place in only marginally differing ways. Karen bin al Ignagni’s bookies will still collect their vigorish, and they will in turn continue to provide for her ~$2m annual compensation (replete with, of course, “affordable” health care insurance). Business more or less as usual, in the big picture. Profitably rearrange those deck chairs. That’s the primary essence of the PPACA.

    Meanwhile, the aggregate health of Americans will continue to decline, despite their ever more inscrutably complex and inexorably more expensive health care “plans.”

    Y’see, we don’t want ACTUAL health “care,” we want a cornucopia of “health care plans.”

    Ghostwritten by lawyers retained by their AHIP CEOs — people who make ten to twenty times Ignagni’s rake.

  22. Thank you Prof DeLong. I had often wondered why American success stopped abruptly in the late 19th century!